How do I take control of my finances?

Understanding basic budgeting techniques will help you stay on top of where your money is going as well as give you the tools necessary to build a personalized budget.

Video transcript

Do you find yourself wondering where all of your money went at the end of the month? If so, you probably need a budget.

Creating a budget is a good way to get an overall picture of your spending habits and will help you make adjustments where necessary — plus it’s super easy to do! Grab a pen and paper.

Write down your gross income and cash flow. This includes your job, any interest or dividends you get from investments, any side income you make and really any money coming into your bank account or pocket every month.

Pay yourself first

The first thing you should do with this money is pay yourself first. Take at least 10% of your gross income and save it. This money should be put away into a bank account or money market fund and only spent in an emergency or for an important purchase like a house. Over time, you will find that this small amount will add up, and you will be thanking your future self.

Consider taxes

Next calculate how much of your money needs to be put away for tax and subtracted. This isn’t your money, it’s the government’s, so put it somewhere where you can’t spend it. If your employer already does this for you, great, you don’t have to worry about it.

Identify your fixed expenses

Now tally your monthly fixed expenses. These are your expenses that occur every month. They include rent, mortgage payments, car payments, utilities, phone, gym membership and anything else you can think of that you pay each month. Add this all together and subtract it from your total. What is left is your spending money.

Spending money

Write down everything that you spend in a month, including things like eating out, groceries, video games, clothing, coffee and birthday gifts. Be brutally honest with yourself. Check your bank statements for the past couple of months to see where your money is really going. Subtract this and arrive at your total.

What to do if you’re spending too much

If you have a negative number, you’re spending too much money. Review your expenses and decide how much you’d like to be spending on each category to set goals for yourself. Think about what is important to you. Do you really enjoy that coffee on the way to work, or could you make it at home and bring it in a to-go mug? Write a list of what you’d like to be spending in each category and stick to it. You can also look at your monthly fixed expenses and assess whether any are too high. Are you paying a ridiculous amount of rent to live in a trendy neighbourhood?

What to do if you have money left over

If you are in the positive, congratulations! You aren’t doing so bad but there is always room for improvement. Review your budget and see if your money is going where you want it. Are any categories higher than you thought? Is your UberEats bill through the roof? Could you make a goal to make one or more meal at home every week?

If you have extra cash at the end of the month, save it to spend it on something you’ve been wanting — maybe a vacation or the next iPhone? Or you can add this money to your long-term savings if you’re thinking of buying something like a house in the future.

Revisiting your budget

It is important to track your spending and revisit your budget once a month to make sure you’re following it. By budgeting you’ll make sure you’re spending your money where you want to be and you’ll be able to save effectively.